Greed, Accountability and Say on Pay
Chapter 7: Disclosure
The Hampel Committee in 1998 noted companies were disclosing remuneration policies ‘with anodyne references to the need to “recruit, retain and motivate” or to pay “market rate”’. Research one year later confi rmed disclosure problems existed. A study by PricewaterhouseCoopers (PWC) for the DTI showed that while many companies in the sample analysed by PWC were disclosing in broad terms how performance was measured, far fewer fi rms disclosed the performance measures in absolute numerical terms (for example, achieve annual net profi t after tax of £x, or achieve annual profi t growth of 10 per cent). Only 2 per cent of the sample disclosed this information for STIs such as the annual bonus, while 21 percent of the sample disclosed this information for LTIs such as the share option plan. More critically, discussion of the link between rewards and performance (the pay for performance link) was low for both general descriptions (37 per cent for STIs and 55 percent for LTIs) and absolute numerical disclosures (17 per cent for STIs and 38 percent for LTIs). Most companies failed to provide information to allow shareholders to make relative performance comparisons. Not only did 97 per cent of companies fail to discuss how company performance over the long term related to companies in the same sector, but 96 percent failed to relate company performance over the long term to a well- known stock market index. Even a more general discussion on how the performance measures for incentive schemes related to long term company objectives was absent, with 95 percent of the sample failing to disclose this information.
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